HIPPO Valley Estates and Barclays Bank of Zimbabwe have clashed over US$2,6 million in the sugar company’s Foreign Currency Account (FCA) which was liquidated by the Reserve Bank of Zimba
bwe in August, businessdigest can reveal.
Of concern to Hippo is that Barclays failed to advise on why its FCA was liquidated by the central bank.
On the advice of Barclays, Hippo protested the liquidation, arguing that it was not procedural.
In a letter written to Barclays managing director Charity Jinya on August 16, Hippo chief executive Sydney Mtsambiwa, and chief financial officer John Chibwe alleged that Barclays was wrongly advised on the transaction.
“Notwithstanding the foregoing, we note that you neither advised us of the RBZ’s directive RE: 5/11 dated December 24 2003, nor did you timeously effect the liquidations as required by the RBZ regulation. We were thus genuinely unaware of the requirements in respect to our export proceeds received on January 22 and July 30 2004,” read Hippo’s letter to Barclays.
The regulations state that foreign currency not liquidated by their respective companies is forfeited to the central bank. However, Hippo states that it had indicated earlier that it wanted to liquidate its hard currency to use the money to buy essential imports.
The central bank directive stated that in “failing to effect liquidations, Barclays Bank violated Exchange Control Act subparagraph (ii) of paragraph (a) of sub-section 1 of section 5 as read with Exchange Control Directives RF:140 dated 26 April 2004 and RG:226 dated 20 May 2005, which stipulate that funds not utilised within 30/21 (sic) days must be liquidated”.
Following the RBZ directive, on August 12 Barclays liquidated US$1 471 085 from Hippo’s FCA, leaving an amount owing of US$1 212 238.
Hippo and the RBZ again met on August 15, and the central bank indicated their intention to give a further directive to liquidate an additional US$1 819 768 in respect of proceeds received over the period January to August 2004, which again were not liquidated within 21 days as required by the central bank directive of December 24 2003.
According to the letter to Jinya, Hippo management pleaded with Barclays to appeal to the central bank to reconsider the directive.
In the letter, Hippo conceded that it was the RBZ’s mandate and prerogative to strictly enforce exchange control regulations, and in this regard requested that Barclays appeal on their behalf to reconsider the directive because it was due to the bank’s oversight.
“As principal to the transactions, we take ultimate responsibility to ensure full compliance with regulatory requirements. We therefore sincerely regret the oversight and apologise to the RBZ authorities for the unintentional non-compliance with exchange control requirements,” Hippo said.
“Notwithstanding the foregoing, we note that you neither advised us on the RBZ’s directive RE:5/11 dated 24 December 2003, nor did you timeously effect the liquidations as required by the RBZ regulations. We were thus genuinely unaware of the requirements in respect of our export proceeds received on January 22 and July 2004.”
Hippo said it was important to note that they later wrote a letter to the RBZ as a last resort after failure to get meaningful responses to several follow-ups with Barclays by telephone.
“We note that the amounts liquidated on August 12 included the sum of US$245 523 which had previously been compulsorily liquidated on June 23,” Hippo said.
“This unfortunate development will inevitably impact adversely on the company’s operations and seriously compromise efforts to maximise sugar production for the remainder of the season and into the foreseeable future unless timely interventions are effected.”
Of concern to Hippo is that the liquidated accounts were meant to procure critical inputs.
“Our diesel stocks as at August 16 stood at 86 000 litres, barely enough to cover one week of operations. Should the situation not improve in the short-term, the company may be forced to significantly scale down operations. Any further scaling down of operations will undermine the company’s ability to meet its domestic and export sugar market obligations.”
Last year, Hippo generated US$25,2 million in exports and is poised to generate US$23,8 in the current year.
The forecast export proceeds for 2006 are around US$28 million at optimum operating conditions.